Financial Literacy & Startling Facts

“Although financial matters are probably not at the front of your minds today, the day will come when you will be responsible for managing your own or your family’s budget or when you find that you need to save to get the things you want …”

Ben Bernanke, Chairman
Federal Reserve
Huntsville Times
April 26, 2007

Yikes!  Big Ben, come on now!  “..The day will come when you will be responsible for managing your own or your family’ budget….”  The day has come!  I would have to argue that financial matters should be at the forefront of everyone’s mind.  Let’s think logically people.  If you want to go to college, get a job, buy a car, get married, buy a house, have children, care for your elderly parents, and someday retire, financial matters should always be on your mind.  Now, I do not want you to go crazy thinking about this stuff, but we have to get serious as a country if we really want to take control of our finances.  The recent economic collapse did not have everything to do with Wall Street greed.  It also had to do with Main Street greed and financial ILLiteracy.  The goal of this website is to educate individuals about all aspects of financial literacy, with the hope that we, as a nation, will increase our knowledge base so that we can make properly informed decisions.

Below are some startling facts related to American saving, spending, etc. which were analyzed during the past five years or so.

Startling Facts (Source: http://www.aicpa.org/)

• 20% of employees are unable to carry out normal work activities three days per week due to financial concerns (http://www.remtech.biz/FactsAndStats.htm).

• The personal saving rate went negative for the first time ever in 1998. Americans are spending $100.20 for every $100.00 they bring home (http://www.remtech.biz/FactsAndStats.htm).

• 2 out of 3 households will probably not be able to accomplish one of their major life goals because they did not plan for the future (http://www.remtech.biz/FactsAndStats.htm).

• In the United States, the most affluent 1% of the population holds more wealth than the entire bottom 90% combined, according to U.S. Federal Reserve research (The Futurist, July-August 2005).

• There are all kinds of ways to describe today’s 30-year-olds. But what may really come to distinguish them is that they could be the most indebted generation in modern history (BusinessWeek, November 14, 2005).

• The most-honored captains of industry – Fortune 500 CEOs – routinely make more in a morning than their average employees earn in a year (The Futurist, July-August 2005).

• It costs the average American family over $200,000 to raise a child to 18 (US Department of Agriculture; http://www.remtech.biz/FactsAndStats.htm).

• In the 2004, U.S. presidential election campaign, President George W. Bush made no apologies for his tax cuts that, in 2004 alone, meant an extra $170,000 for average taxpayers in the nation’s most affluent 1% (The Futurist, July-August 2005).

• Approximately 57% of all divorces are due to arguments over money (http://www.remtech.biz/FactsAndStats.htm).

• The American Savings Education Council’s 2004 report, Saving and Retirement in America, states that among all workers, 45 percent have less than $25,000 in savings and investments (aside from equity in primary residences). In the age group 25-34, 64 percent have less than $25k in savings; in the age group 35-44, 48 percent have less than $25k; in the age group 45-54, 30 percent have less than $25k. According to a 2002 survey by the Consumer Federation of America, 25 percent of U.S. households have net assets of less than $10,000 (http://www.mdmproofing.com/iym/hfstats.shtml).

• America is the richest country in the world, yet, ironically, we have the highest percentage of people living paycheck to paycheck. A recent study from ACNielsen revealed that about one in every four Americans say they don’t have any spare cash (“Escape the Credit Card Trap,” Kiplinger, 10/6/2005).

• In 1943, America’s very richest, according to U.S. Internal Revenue Service statistics, paid 78% of their total incomes in federal income tax. In 2003, by contrast, they paid a mere 17.5% of their total incomes in federal tax (The Futurist, July-August 2005).
• The U.S. federal minimum wage currently stands at $5.15 an hour or $10,712 over the course of a year. A couple, with each spouse earning minimum wage, earns twice that, or $21,424. In 2003, the incomes of the richest 1% of U.S. citizens averaged $1.082 million for the year. In 2003, the middle 20% of income earners averaged $36,000 per household, less than twice the income for a minimum-wage worker (The Futurist, July-August 2005).

• Compared to average weekly filings of 30,000 to 35,000 during the month of October in recent years, Lundquist Consulting, Inc. (Burlingame, CA) reported over 205,000 filings for the week that ended on October 15. However, even that leap in filing volume didn’t capture all of the activity in bankruptcy courts the last few days before the October 17th implementation. According to Fitch Ratings, “[f]ilings made on the weekend, as well as a large backlog, were processed in the week ended Oct. 21, which clocked in with 315,017 filings (http://www.spotlightonfinance.org/2005/November/forecast-story3.htm).

• From 1992-2000, disposable personal income rose 47%, but personal spending increased 61% (http://www.remtech.biz/FactsAndStats.htm).

America, we need help!  Financial literacy education is of extreme importance, and should be on everyone’s mind.